Julie Donohue, PhD, associate professor, health policy at the University of Pittsburgh Graduate School of Public Health

John A. Graves, PhD, assistant professor, health policy at Vanderbilt University School of Medicine in Nashville

Richard L. Kravitz, MD, MSPH, professor and co-vice chair (research), interim director, UC Center at the University of California at Davis in Sacramento

David H. Howard, PhD, associate professor, health policy and management, Rollins School of Public Health at Emory University in Atlanta

Tal Gross, PhD, assistant professor of Health Policy and Management at Columbia University's Mailman School of Public Health in New York City

Several New Options

Jerry Penso, MD: "Shared risk, based on the total cost of care for an attributed population, is one payment model that affords health systems an on-ramp to gradually adapt to new incentives while building the infrastructure required to measure and improve value. Bundled payments may be the right fit for hospital- or procedure-based episodes. Global payments, including risk-adjusted, population-based payments, may promote overall efficiency and provide maximum flexibility for strategic deployment of resources. It is likely in the coming years that health systems will be required to handle a variety of payment models for different segments of patients and conditions."

Piper Su: "This week's announcement was a clear indicator that the Medicare program is moving towards payment models that emphasize greater provider accountability for managing a patient's overall health. This is a significant shift in incentives, encouraging providers to utilize population-based care models that reward effectiveness of care rather than volume of care. Thus, we expect to see care models that capitalize on things like preventive care, care coordination, and patient engagement."

What About ACOs?

Julie Donohue, PhD: "To improve efficiency, alternative payment models need to be tied to some sort of global budget. In the case of Accountable Care Organizations, large provider organizations, including both primary and specialty care providers, are responsible for meeting targets for all of the costs for their patient population, not just for the services under their direct control. Bundled payments use the same idea for discrete episodes of care, typically connected to an expensive surgical procedure."

John Graves, PhD: "For broader, population-based efforts like ACOs there are key concerns that they set up incentives for hospitals and provider groups to consolidate. On the one hand, this may help achieve better coordination; on the other, it sets up the possibility that local monopolies will emerge, which could put upward pressure on the prices ACOs can charge."

Potential Downsides

Richard Kravitz, MD: "The success of the plan will hinge on the details. What will replace fee-for-service? Two candidates have advanced to the fore: bundled payment and accountable care organizations. But bundled payment applies to a limited array of services, mostly involving surgical care. And early experience with accountable care organizations has highlighted the difficulties involved in identifying just who is (and ought to be) accountable for care and outcomes. Moreover, regardless of the accounting scheme, value-based payment requires systems for measuring both medical risk and quality reproducibly and accurately. Our ability to measure quality at the aggregate level is excellent, but quality assessment at the individual level lags far behind."

David Howard, PhD: "Fee-for-service encourages overuse and provides incentives to focus on the volume of care delivered rather than patient outcomes. But unless providers merge into large organizations like Accountable Care Organizations that can accept capitated reimbursements, there isn't a viable alternative. CMS has touted its Physician Quality Reporting System, but most of the measures are tied to the provision of services (e.g., lipid profile for beneficiaries ≤ 75 with diabetes). Giving bonuses to physician groups that have higher performance on these measures is just fee-for-service in another form. Bonuses and penalties tied to outcomes (like readmissions) help, but there is only so far CMS can go in terms of tying reimbursement to outcomes. It is nearly impossible to measure outcomes for most of the services that Medicare beneficiaries receive."

Tal Gross, PhD: "Any shift away from fee-for-service payments raises concerns about 'cream skimming.' Some patients just need more care than others. Under fee-for-service payments, the sickest patients are most attractive to providers. After all, when you are paid for providing care, you want patients that need care. But once providers are paid in other ways, then the calculus changes. High-risk patients suddenly become unattractive, and low-risk patients, who don't need much care, become attractive. Providers face an incentive to deter the high-risk patients and attract the low-risk patients. This is how we end up with the cliche of an HMO on a fifth-floor walk-up with no elevator."

Graves: "Key concerns with bundled acute care payments are the adequacy of risk-adjustment mechanisms to fairly define payment for a given bundled episode, and the difficulty of defining bundles for certain episodes of care that either have a lot of patient variation in terms of acuity and co-morbid conditions. Some more narrowly defined procedures, like hip replacement, for example, might be more natural candidates for a bundled payment system. But defining a bundle for other conditions, like chronic heart failure, is more difficult."

Changes Necessary

Su: "Providers are going to need substantial support to drive the type of cultural and operational changes that these new care models require, and they need much better access to actionable information if they are going to truly manage and coordinate patient care. Thus, the next steps in this initiative will be key to realizing the goals here. If we put providers at financial risk for patient care without ensuring that they have the knowledge and tools to successfully deploy these new care strategies, we put their long-term viability in jeopardy. Care transformation is not something that can be achieved with a piecemeal approach -- we must outline a clear pathway for providers to get to greater risk and accountability while ensuring they have the support they need along the way."

Donohue: "For Medicare payment reforms to have the desired impact on the quality and cost of care, major progress needs to be made on three fronts. First, provider practices need to be large enough that they have the human and technological capacity to manage the health of their patient populations. Second, we need to see further advances in the science of provider performance measurement. Third, while electronic health records are now in place in the majority of hospitals and doctors offices, most providers are using them to take care of one patient at a time. In order to make our healthcare system more efficient -- to do more with less -- our health IT systems need to be set up to support population health management."

Don't Overlook Patient Care

Gross: "In the past, regulators did not allow Medicare Advantage plans to turn away applicants. Despite that, Advantage plans still managed to attract healthy enrollees. Today, payment reforms face a similar challenge. Only time will tell if alternatives to standard, fee-for-service payments will be able to improve care while not inducing providers to cream-skim."

Kravitz: "The various forms of capitation (including HMOs and accountable care organizations) promote stinginess in delivering care to one degree or another. One can erect defenses against underprovision of care, but clever providers will find a way around these defenses -- and, because most patients do well (do not die, report reasonably high quality of life, report good satisfaction with care) no matter what -- they will often get away with it."

Penso: "The currently available quality measures are almost entirely process measures that do not fully measure quality that matters to patients or their physicians. There is a real potential for additional workload that detracts from patient care. The cost of care may be impacted over time as delivery systems are redesigned and adjust to the new incentives. Yet, we must guard against creating unintended consequences, such as decreased access to valuable services or medical innovations. "

Howard: "I worry providers may focus too much on the provision of services used to calculate quality scores. Guidelines increasingly recommend that care be individualized and that providers incorporate patient preferences into treatment and screening recommendations. Tying payment to quality measures moves us in the opposite direction. Paying large health systems via capitation could have a big impact on costs. Other initiatives ... not so much."

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